Nunn Hayward - December 2006

Abacus December 2006

Residence Rules Turned Upside Down

Those who become, or remain not resident and not ordinarily resident for UK tax purposes have two key advantages for UK tax purposes: -

pay Income Tax on UK source income only
pay NO UK Capital Gains Tax, regardless of location of asset

In a recent case concerning residence the Special Commissioner has ruled in favour of HMRC even though they were going against their own published guidelines in determining the residence status of the taxpayer concerned.

The ruling has enabled HMRC to ignore its own IR20 booklet turning the residence rules upside down.

This may have a serious impact on wealthy individuals currently living offshore but spending time each year in the UK.

Hitherto, the position has been understood in practice to be that individuals must remain out of the UK for at least 183 days of the tax year and spend an average of less than 91 days in a tax year in the UK. However this is not defined in legislation.

A key concept for many was that days of arrival in, and departure from the UK could normally be ignored.

The case examined the position of the taxpayer arriving one day and departing the next, so that these visits were not counted in arriving at the number of days spent in the UK. HMRC, however, claimed that they should count and the Special Commissioner agreed.

Although the decision is likely to be appealed against, it now leaves many non-residents in a state of uncertainty.

This case also has Inheritance Tax (IHT) implications – people who had assumed that they were not resident in the UK in previous tax years could now find that they have been resident here for 17 out of the last 20 years and are therefore deemed UK domiciled for IHT. This means that their worldwide assets are subject to UK IHT.

If you have any queries regarding this article contact Steve Cook, Tax Partner at steve@nunn-hayward.com or tel: 01753 888211.

Artic Systems - Update

This landmark husband and wife company tax case will now be heard by the House of Lords on 6th and 7th June 2007.

HMRC have controversially used the “settlements” legislation to attack family companies; many of which were set up after being incentivised by Gordon Brown’s 0% small company tax rate abolished last year.

Whilst the Court of Appeal found in favour of Geoff and Diana Jones, uncertainty still remains for large numbers of family businesses as to what constitutes legitimate tax planning, and what in the opinion of HMRC is “Avoidance”.

We at Nunn Hayward will keep the outcome of the case under close scrutiny, and update you all following the publication of the decision.

If you have any queries regarding this article please contact Steve Cook, Tax Partner at steve@nunn-hayward.com or tel: 01753 888211.

Important Tax Dates

Janurary 2007
31	-	First self assessment payment on account for 2006/07
	-	Capital Gains payment for 2005/06
	-	Balancing payment - 2005/06 Income Tax/class 4 NICs
	-	Last day to file the 2006 Tax Return

Please contact us to discuss the above further

Tel: 01753 888211 Fax: 01753 889669 Email: abacus@nunn-hayward.com
Nunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL.

Chartered Accountants, Registered Auditors and Insolvency Practitioners. This publication has been prepared as a guide only to topics of current financial and business interest. It is not intended to be a substitute for professional advice. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by either the authors or Nunn Hayward. All rights reserved.

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